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Nano Case

The Tata Nano car project aimed to develop an incredibly cheap "people's car" costing just Rs. 100,000 for average Indians. To keep costs low, it decreased parts, outsourced 85% of component production, and set standards to lower maintenance costs. It was also located in Singur for tax breaks. The Nano included safety features like frontal collision protection but lacked airbags and advanced systems. It offered enough space for 4 people while being smaller than competitors. However, its rear-engine design led to some roughness. With an engine costing less than competitors and 23 km/liter efficiency versus 18.1 km/liter for the Alto, the Nano also had strong

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XI JIN
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22 views

Nano Case

The Tata Nano car project aimed to develop an incredibly cheap "people's car" costing just Rs. 100,000 for average Indians. To keep costs low, it decreased parts, outsourced 85% of component production, and set standards to lower maintenance costs. It was also located in Singur for tax breaks. The Nano included safety features like frontal collision protection but lacked airbags and advanced systems. It offered enough space for 4 people while being smaller than competitors. However, its rear-engine design led to some roughness. With an engine costing less than competitors and 23 km/liter efficiency versus 18.1 km/liter for the Alto, the Nano also had strong

Uploaded by

XI JIN
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Assignment D

Question 1

Pricing: The goal of developing a brand-new, incredibly cheap “people's car" that would be accessible to
every Indian and cost just Rs. 1 lakh gave rise to the Nano project. The middle class, low-income scooter
families, and first-time purchasers were the primary target segments. In order to cut down on inventory,
logistics expenses, overhead, and direct costs, the firm decreased the number of parts in the vehicle and
outsourced 85% of the component production. For instance, the seating system was produced using
10% fewer components at a cost of 50–60% of a Maruti. The service team set standards for fuel
economy, tire life, service intervals, and costs associated with routine maintenance in an effort to lower
maintenance expenditures. It also cut expenses by employing a small staff, sourcing locally (around
70% of suppliers were local), and deciding to locate its manufacturing in Singur, West Bengal,
where it could take advantage of tax and excise duty breaks.

Safety: On top of that, the Nano automobile was designed to be secure. Exhibit 5 demonstrates that the
Nano automobile included features such as a comprehensive frontal collision system, steering
system protection, side door intrusion for doors, etc. However, the vehicle did not come equipped with
airbags, trip-Tonic, anti-lock brakes, electronic power-assisted steering, cruise control, or trip-Tonic.

Comfort: It was pleasant for a family, for example, and was big enough for 4 people while being smaller
than other minicars (Exhibit 7 shows that compared to Maruti 800 (Maruti Suzuki) and Alto (Maruti Suzuki),
Nano was shorter). The inside volume was also significantly better than that of other compact vehicles in
India: the advantage of the rear-engine, rear-wheel drive was that it would free up a lot of room for the
client. However, the extra room has drawbacks such as roughness, vibration, and noise.

Fuel efficiency: The Nano engine was not only the least expensive on the market, but it was also the most
fuel-efficient. Its fuel efficiency was 23 km/liter, as opposed to Alto's 18.1 km/liter.

Sustainability: The threshold for emissions in the nation was 101 grams of carbon dioxide per kilometer
(from Exhibit 6 we can see that in 2009 it obtained CMVR certification). Rear-engine, rear-wheel drive
vehicles can have minimal weights and footprints. Additionally, the business chose against using any extra
technology, such as turbocharging, inter-cooling, or gasoline direct injection, in order to decrease
emissions.

Question 2

According to the case, the mini car market in India was predicted to grow at a CAGR of 50.4% from 0.05
million units in 2008–2009 to 0.38 million units in 2013–2014. Additionally, the case estimates that by
2020, 439 million Indians would have incomes that would allow them to purchase a new car for
between $2,500 and $5,000.

We may anticipate that the demand for Nano vehicles will increase at the rate of the market when we take
into account the competitive advantages discussed in answer to Question 1. These benefits include low
cost, fuel economy, and safety. Therefore, we anticipate that there will be greater demand for Nano cars
than the present annual supply objective of 250,000 vehicles.

However, my recommendation would be to take a cautious approach and plan production year by year
based on the minicars’ market expectations. Even if demand is expected to be more than 250000, we do
not know whether customers will perceive Nano’s competitive advantage. Nano minicar is a totally
innovative product. I would, therefore, start in Year 1 to produce 250000 cars, at the same time monitor
sales, demand, and financial profitability. If in Year 1 demand happens to be significantly higher than what
Tata supplied, then the company can invest and produce accordingly.
Question 1 Value curve graph

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